TEXTRON INC

Previous wording

In 2023, Textron’s revenues increased 6%, compared with 2022, reflecting the impact of higher pricing, principally at the Textron Aviation, Industrial and Bell segments, and higher volume and mix at the Industrial segment. Segment profit increased 17%, compared with 2022, largely due to higher pricing, net of inflation at the Textron Aviation and Industrial segments. Our backlog increased 5% in 2023 to $13.9 billion, which included a $782 million increase at the Textron Aviation segment. During 2023, we continued to manage through the impacts of ongoing global supply chain shortages/delays and labor shortages to deliver products to our customers. Financial highlights for 2023 also include:

Current wording

Financial highlights for 2024 also include:

Previous wording

•Generated $1.3 billion of net cash from operating activities from our manufacturing businesses.

Current wording

•Generated $1.0 billion of net cash from operating activities from our manufacturing businesses.

Previous wording

•Invested $570 million in research and development projects and $402 million in capital expenditures.

Current wording

•Invested $491 million in research and development projects and $364 million in capital expenditures.

Previous wording

•Returned $1.2 billion to our shareholders through the repurchase of 16.2 million shares of our common stock.

Current wording

•Returned $1.1 billion to our shareholders through the repurchase of 12.9 million shares of our common stock.

Previous wording

Interest expense, net includes interest expense for both the Finance and Manufacturing borrowing groups, with interest on intercompany borrowings eliminated, and interest income earned on cash and equivalents for the Manufacturing borrowing group. In 2023, interest expense, net decreased $30 million, 28%, compared with 2022, primarily due to an increase in interest income of $34 million. For 2023, 2022 and 2021, gross interest expense totaled $133 million, $129 million and $142 million, respectively.

Current wording

Interest expense, net includes interest expense for both the Finance and Manufacturing borrowing groups, with interest on intercompany borrowings eliminated, and interest income earned on cash and equivalents for the Manufacturing borrowing group. In 2024, interest expense, net increased $20 million, 26%, compared with 2023, primarily due to an increase in the weighted-average interest rate of our debt and $7 million in lower interest income. For 2024, 2023 and 2022, gross interest expense totaled $146 million, $133 million and $129 million, respectively.

Previous wording

Special charges include restructuring activities and asset impairment charges as described in Note 16 to the Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data.

Current wording

Special charges of $78 million and $126 million in 2024 and 2023, respectively, include restructuring activities and asset impairment charges as described in Note 15 to the Consolidated Financial Statements on page 62.

Previous wording

In 2023 and 2022, the effective tax rate of 15.2% was lower than the U.S. federal statutory tax rate of 21%, largely due to the favorable impact of research and development credits and tax deductions for foreign-derived intangible income.

Current wording

In 2024, the effective tax rate of 12.5% was lower than the U.S. federal statutory tax rate of 21%, largely due to the favorable impact of research and development credits and the effective settlement of certain tax positions in the fourth quarter of 2024, which is discussed in Note 16 to the Consolidated Financial Statements on page 63. In 2023, the effective tax rate of 15.2% was lower than the U.S. federal statutory tax rate of 21%, largely due to the favorable impact of research and development credits and tax deductions for foreign-derived intangible income.

Previous wording

For a full reconciliation of our effective tax rate to the U.S. federal statutory tax rate, see Note 17 to the Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data.

Current wording

For a full reconciliation of our effective tax rate to the U.S. federal statutory tax rate, see Note 16 to the Consolidated Financial Statements on page 63.

Previous wording

We conduct our business through six operating segments: Textron Aviation, Bell, Textron Systems, Industrial, Textron eAviation and Finance. Segment profit is an important measure used for evaluating performance and for decision-making purposes. Beginning in 2023, we changed how we measure our segment profit for the manufacturing segments to exclude the non-service components of pension and postretirement income, net; LIFO inventory provision; and intangible asset amortization. This measure also continues to exclude interest expense, net for Manufacturing group; certain corporate expenses; gains/losses on major business dispositions; and special charges. The prior periods have been recast to conform to this presentation. The measurement for the Finance segment includes interest income and expense along with intercompany interest income and expense. Operating expenses for the Manufacturing segments include cost of sales and selling and administrative expense, while excluding certain corporate expenses, LIFO inventory provision, intangible asset amortization and special charges.

Current wording

We operate in, and report financial information for, the following six operating segments: Textron Aviation, Bell, Textron Systems, Industrial, Textron eAviation and Finance. Segment profit is an important measure used for evaluating performance and for decision-making purposes. Segment profit for the manufacturing segments excludes the non-service components of pension and postretirement income, net; LIFO inventory provision; intangible asset amortization; interest expense, net for Manufacturing group; certain corporate expenses; gains/losses on major business dispositions; special charges and the inventory valuation charge to write down production-related powersports inventory. The operating costs used to derive segment profit for our manufacturing segments includes cost of sales, research and development costs and selling and administrative expense. The cost of sales discussed in this Segment Analysis section excludes the LIFO inventory provision, intangible asset amortization and the inventory valuation charge discussed above that are reported within Cost of products sold or Cost of services sold on the Consolidated Statement of Operations. The measurement for the Finance segment includes interest income and expense along with intercompany interest income and expense.

Previous wording

In our discussion of comparative results for the Manufacturing group, changes in revenues and segment profit for our commercial businesses typically are expressed in terms of volume and mix, pricing, foreign exchange, acquisitions and dispositions, inflation and performance. For revenues, volume and mix represents changes in revenues from increases or decreases in the number of units delivered or services provided and the composition of products and/or services sold. For segment profit, volume and mix represents a change due to the number of units delivered or services provided and the composition of products and/or services sold at different profit margins. Pricing represents changes in unit pricing. Foreign exchange is the change resulting from translating foreign-denominated amounts into U.S. dollars at exchange rates that are different from the prior period. Revenues generated by acquired businesses are reflected in Acquisitions for a twelve-month period, while reductions in revenues and segment profit from the sale of businesses are reflected as Dispositions. Inflation represents higher material, wages, benefits, pension service cost or other costs. Performance reflects an increase or decrease in research and development, depreciation, selling and administrative costs, warranty, product liability, quality/scrap, labor efficiency, overhead, product line profitability, start-up, ramp up and cost-reduction initiatives or other manufacturing inputs.

Current wording

In our discussion of comparative results for the Manufacturing group, material changes in revenues and segment profit for our commercial businesses typically are expressed in terms of product line revenues, including volume and mix and pricing; foreign exchange; acquisitions and dispositions; inflation; manufacturing efficiency; and changes in research and development costs and selling and administrative expense. For revenues, volume and mix represents changes in revenues from increases or decreases in the number of units delivered or services provided and the composition of products and/or services sold. For segment profit, volume and mix represents a change due to the number of units delivered or services provided and the composition of products and/or services sold at different profit margins. Pricing represents changes in unit pricing. Foreign exchange is the change resulting from translating foreign-denominated amounts into U.S. dollars at exchange rates that are different from the prior period. Revenues generated by acquired businesses are reflected in Acquisitions for a twelve-month period, while reductions in revenues and segment profit from the sale of businesses are reflected as Dispositions. Inflation represents higher material, wages, benefits, pension service cost or other costs. Manufacturing efficiency includes changes in material, labor and overhead variances to standards, typically due to scrap rates, labor efficiency or inefficiencies, facility usage and other manufacturing productivity inputs.

Previous wording

Approximately 21% of our 2023 revenues were derived from contracts with the U.S. Government, including those under the U.S. Government-sponsored foreign military sales program. For our segments that contract with the U.S. Government, changes in revenues related to these contracts are expressed in terms of volume. Changes in segment profit for these contracts are typically expressed in terms of volume and mix and performance; these include cumulative catch-up adjustments associated with a) revisions to the transaction price that may reflect contract modifications or changes in assumptions related to award fees and other variable consideration or b) changes in the total estimated costs at completion due to improved or deteriorated operating performance.

Current wording

Approximately 25% of our 2024 revenues were derived from contracts with the U.S. Government, including those under the U.S. Government-sponsored foreign military sales program. For our segments that contract with the U.S. Government, material changes in revenues related to these contracts are expressed in terms of volume. Changes in segment profit for these contracts are typically expressed in terms of volume and mix and contract performance, which includes cumulative catch-up adjustments associated with a) revisions to the transaction price that may reflect contract modifications or changes in assumptions related to award fees and other variable consideration or b) changes in the total estimated costs at completion due to improved or deteriorated operating performance.

Previous wording

Textron Aviation’s backlog increased $782 million in 2023, reflecting orders in excess of deliveries.

Current wording

Textron Aviation’s backlog increased $676 million, 9%, in 2024, reflecting orders in excess of deliveries.

Previous wording

Textron Systems Revenues and Operating Expenses

Current wording

Textron Systems revenues and segment profit increased $6 million and $7 million, respectively, in 2024, compared with 2023. The impact on volume related to the cancellation of the Shadow program in the first quarter of 2024 was largely offset by higher volume on the Ship-to-Shore Connector program.

Previous wording

We expect to have sufficient cash to meet our needs based on our existing cash balances, the cash we expect to generate from our manufacturing operations and the availability of our existing credit facility. In addition to our manufacturing operating cash requirements, future material cash outlays include our contractual combined debt and interest payments for the Manufacturing group of $483 million in 2024, $467 million in 2025, $452 million in 2026 and $2.8 billion thereafter, and for the Finance Group of $32 million in 2024, $49 million in 2025, $22 million in 2026 and $613 million thereafter.

Current wording

We expect to have sufficient cash to meet our needs based on our existing cash balances, the cash we expect to generate from our manufacturing operations and the availability of our existing credit facility. In addition to our manufacturing operating cash requirements, future material cash outlays include our contractual combined debt and interest payments for the Manufacturing group of $473 million in 2025, $457 million in 2026, $444 million in 2027 and $2.5 billion thereafter, and for the Finance group of $46 million in 2025, $20 million in 2026, $69 million in 2027 and $507 million thereafter.

Previous wording

For the Manufacturing Group, we also have purchase obligations that require material future cash outlays totaling $2.9 billion in 2024, $445 million in 2025 and $107 million thereafter. Purchase obligations include undiscounted amounts committed under legally enforceable contracts or purchase orders for goods and services with defined terms as to price, quantity and delivery dates, as well as property, plant and equipment. Approximately 14% of our purchase obligations represent purchase orders issued for goods and services to be delivered under firm contracts with the U.S. Government for which we have full recourse under customary contract termination clauses.

Current wording

For the Manufacturing group, we also have purchase obligations that require material future cash outlays totaling $2.7 billion in 2025, $501 million in 2026 and $355 million thereafter. Purchase obligations include undiscounted amounts committed under contracts or purchase orders for goods and services with defined terms as to price, quantity and delivery dates, as well as property, plant and equipment. Approximately 28% of our purchase obligations represent purchase orders issued for goods and services to be delivered under firm contracts with the U.S. Government for which we have full recourse under customary contract termination clauses.

Previous wording

We also maintain an effective shelf registration statement filed with the Securities and Exchange Commission that allows us to issue an unlimited amount of public debt and other securities. In November 2023, we issued $350 million in SEC-registered fixed-rate notes due in November 2033 with an annual interest rate of 6.10%. The proceeds will be used for general corporate purposes, including the redemption or repayment of certain of our debt, including the $350 million outstanding amount of our 4.30% notes due in March 2024.

Current wording

We also maintain an effective shelf registration statement filed with the Securities and Exchange Commission that allows us to issue an unlimited amount of public debt and other securities. On March 1, 2024, we repaid our $350 million 4.30% Notes due March 2024.

Previous wording

In 2023, investing cash flows included capital expenditures of $402 million, partially offset by $40 million of net proceeds from corporate-owned life insurance policies. Investing cash flows in 2022 included capital expenditures of $354 million and $202 million of net cash paid for business acquisitions, largely related to the Pipistrel acquisition.

Current wording

In 2024 and 2023, investing cash flows included capital expenditures of $364 million and $402 million, respectively, partially offset by net proceeds from corporate-owned life insurance policies of $85 million and $40 million, respectively.

Previous wording

Cash flows used by financing activities in 2023 included $1,168 million of cash paid to repurchase an aggregate of 16.2 million shares of our common stock under the 2023 share repurchase plan described below, partially offset by $348 million of net proceeds from the issuance of long-term debt. In 2022, cash flows used by financing activities included $867 million of cash paid to repurchase an aggregate of 13.1 million shares of our common stock under a 2022 share repurchase plan.

Current wording

Cash flows used by financing activities in 2024 included $1.1 billion of cash paid to repurchase an aggregate of 12.9 million shares of our common stock under the 2023 share repurchase plan described below and payments on long-term debt of $361 million. In 2023, cash flows used by financing activities included $1.2 billion of cash paid to repurchase an aggregate of 16.2 million shares of our common stock, partially offset by $348 million of net proceeds from the issuance of long-term debt.

Previous wording

On July 24, 2023, Textron's Board of Directors approved a new program for the repurchase of up to 35 million shares of our common stock. This share repurchase program allows us to continue our practice of repurchasing shares to offset the impact of dilution from stock-based compensation and benefit plans and for opportunistic capital management purposes. The new program has no expiration date and replaced the prior 2022 share repurchase program, which was utilized in 2022 for repurchases.

Current wording

In July 2023, Textron's Board of Directors approved a program for the repurchase of up to 35 million shares of our common stock. This share repurchase program allows us to continue our practice of repurchasing shares to offset the impact of dilution from stock-based compensation and benefit plans and for opportunistic capital management purposes. The repurchase program has no expiration date and there were 15.6 million shares remaining under the program at December 28, 2024.

Previous wording

The Finance group’s cash flows from investing activities primarily included collections on finance receivables totaling $169 million and $147 million in 2023 and 2022, respectively, partially offset by finance receivable originations of $160 million and $92 million, respectively. Cash flows provided by investing activities in 2022 also included $45 million of other investing activities, largely related to proceeds from the sale of operating lease assets. Cash flows used in financing activities included payments on long-term and nonrecourse debt of $37 million and $216 million in 2023 and 2022, respectively.

Current wording

The Finance group’s cash flows from investing activities primarily included collections on finance receivables totaling $133 million and $169 million in 2024 and 2023, respectively, partially offset by finance receivable originations of $130 million and $160 million, respectively. Cash flows used in financing activities included payments on long-term and nonrecourse debt of $16 million and $37 million in 2024 and 2023, respectively.

Previous wording

In 2023, investing cash flows included capital expenditures of $402 million, partially offset by $40 million of net proceeds from corporate-owned life insurance policies. Investing cash flows in 2022 included capital expenditures of $354 million and $202 million of net cash paid for business acquisitions, largely related to the Pipistrel acquisition.

Current wording

In 2024 and 2023, investing cash flows included capital expenditures of $364 million and $402 million, respectively, partially offset by net proceeds from corporate-owned life insurance policies of $85 million and $40 million, respectively.

Previous wording

Cash flows used by financing activities in 2023 included $1,168 million of share repurchases, partially offset by $348 million of net proceeds from the issuance of long-term debt. In 2022, cash flows used by financing activities included $867 million of share repurchases and $234 million of payments on long-term debt.

Current wording

Cash flows used by financing activities in 2024 included $1.1 billion of share repurchases and payments on long-term debt of $377 million. In 2023, cash flows used by financing activities included $1.2 billion of share repurchases, partially offset by $348 million of net proceeds from the issuance of long-term debt.

Previous wording

To prepare our Consolidated Financial Statements to be in conformity with generally accepted accounting principles, we must make complex and subjective judgments in the selection and application of accounting policies. The accounting policies that we believe are most critical to the portrayal of our financial condition and results of operations are listed below. We believe these policies require our most difficult, subjective and complex judgments in estimating the effect of inherent uncertainties. This section should be read in conjunction with Note 1 to the Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data, which includes other significant accounting policies.

Current wording

To prepare our Consolidated Financial Statements to be in conformity with generally accepted accounting principles, we must make complex and subjective judgments in the selection and application of accounting policies. The accounting policies that we believe are most critical to the portrayal of our financial condition and results of operations are listed below. We believe these policies require our most difficult, subjective and complex judgments in estimating the effect of inherent uncertainties. This section should be read in conjunction with Note 1 to the Consolidated Financial Statements on page 38, which includes other significant accounting policies.

Previous wording

To determine the weighted-average expected long-term rate of return on plan assets, we consider the current and expected asset allocation, as well as historical and expected returns on each plan asset class. A lower expected rate of return on plan assets will decrease pension income. For 2023 and 2022, the assumed expected long-term rate of return on plan assets used in calculating pension income was 7.14% and 7.10%, respectively. For 2023, the assumed rate of return for our domestic plans, which represent approximately 90% of our total pension assets, was 7.25%.

Current wording

To determine the weighted-average expected long-term rate of return on plan assets, we consider the current and expected asset allocation, as well as historical and expected returns on each plan asset class. A lower expected rate of return on plan assets will decrease pension income. For 2024 and 2023, the assumed expected long-term rate of return on plan assets used in calculating pension income was 7.16% and 7.14%, respectively. For 2024, the assumed rate of return for our domestic plans, which represent approximately 90% of our total pension assets, was 7.25%. Net periodic benefit income is sensitive to changes in the expected long-term rate of return on plan assets.

Previous wording

The discount rate enables us to state expected future benefit payments as a present value on the measurement date, reflecting the current rate at which the pension liabilities could be effectively settled. This rate should be in line with rates for high-quality fixed income investments available for the period to maturity of the pension benefits, which fluctuate as long-term interest rates change. A lower discount rate increases the present value of the benefit obligations and generally decreases pension income. In 2023, the weighted-average discount rate used in calculating pension income was 5.51%, compared with 2.99% in 2022. For our domestic plans, the assumed discount rate was 5.55% in 2023, compared with 3.05% in 2022. A change of 50 basis-points higher or lower, with all other assumptions held constant, in this weighted-average discount rate in 2023 would have changed our pension income for our domestic plans by approximately $10 million.

Current wording

The discount rate enables us to state expected future benefit payments as a present value on the measurement date, reflecting the current rate at which the pension liabilities could be effectively settled. This rate should be in line with rates for high-quality fixed income investments available for the period to maturity of the pension benefits, which fluctuate as long-term interest rates change. A lower discount rate increases the present value of the benefit obligations and generally decreases pension income. In 2024, the weighted-average discount rate used in calculating pension income was 5.19%, compared with 5.51% in 2023. For our domestic plans, the assumed discount rate was 5.25% in 2024, compared with 5.55% in 2023. A change of 50 basis-points higher or lower, with all other assumptions held constant, in this weighted-average discount rate in 2024 would have changed our pension income for our domestic plans by approximately $10 million.